Converging and Emerging: Philippines Real Estate Financial Innovation

The Philippines shows how emerging real estate markets are beginning to convergewith developed markets. The opportunities in the Philippines revolve around the country’s burgeoning growth in back office outsourcing, remittances from foreign workers and rapid growth in regional tourist arrivals.

The Philippines is starting to buzz with the potential ofreal estate investment trusts (REITs). After recent enactment of a REIT law, conferences like The 2nd Annual REIT Asia Pacific Philippines 2010 Summit,are trying to generate support for these vehicles. REITs are creditedfor making real estate markets more transparent, liquid and investable, allowing broader ownership of real estate assets, potentially improving yield on those investments, improving information about land and property prices and giving the government access to tax revenues for transactions currently being kept off the books. As this Business World article points out, developers are keen on the tax breaks for transactions to transfer properties to REITs and the exemptions for issuance of securities.

In the Philippines, developers are on hold waiting for the implementation of the law as the government debates the fiscal impacts of the tax benefits entailed by the REITs. Till then, they’ll surely look for alternative means of raising capital for growth.